The week in review: Time for MP3.com to pay the piper

A federal judge ruled MP3.com willfully infringed the copyrights of Seagram's Universal Music Group, opening the company to enormous potential damages in one of the first trials to address the legal boundaries of Internet music distribution.

The presiding judge said the online music company must pay $25,000 per violation stemming from its My.MP3.com "music locker" service.

MP3.com estimated during the trial that 4,700 CDs covered by Universal's copyrights were stored on its database, possibly exposing the company to damages of $118 million. However, the actual number of CDs that were copied--and therefore the amount of damages--has not been determined.

The company's chief executive, Michael Robertson, said the My.MP3.com service will be turned on sometime in the next few weeks, giving members access to music stored on the company's computers in San Diego. To access their music over the Internet, members must first prove they paid for a recording by briefly inserting the CD into a computer's CD-ROM drive.

Song-swapping company Napster, embroiled in a landmark copyright lawsuit with the recording industry, tried to distance itself from a federal judge's strong ruling against MP3.com.

"We believe (the judge's) decision on the MP3.com case is both factually and legally distinct from the Napster case," a Napster lawyer said.

But that hasn't eased Napster's legal turmoil. The attorney representing Metallica and rap star Dr. Dre in their lawsuits against Napster is sending a barrage of letters to top universities, pushing them to block students from using the popular file-swapping software. The letters don't explicitly threaten a lawsuit against the universities. But they do include a copy of the groups' lawsuit against Napster, which contains a generic placeholder for adding new universities into the legal crosshairs.

A pseudonymous hacker has launched a Web graffiti spree, defacing Web sites ranging from NASA to the Communications Workers of America with a pro-Napster message. The hacker, who goes by the name "Pimpshiz," claimed 50 victim sites in a posting that included a screen lambasting the recording industry for its lawsuit against Napster.

Microsoft is boosting music offerings on its Microsoft Network with the acquisition of MongoMusic, a site with advanced music-searching capabilities. The software giant will spend about $65 million in an all-stock transaction for the start-up and its search technology.

With song-swapping companies Napster, MP3.com and Scour mired in copyright lawsuits, file-sharing entrepreneurs may start singing the blues when it comes to landing venture capital funding. The outcomes could unleash a flood of VC money--or slow it to a trickle. Many experts are bracing for judges to rule against the file-swapping companies, causing venture funding to dry up for other players in the risky niche.

Slowdown? What slowdown?
Shares of chipmaker Intel dropped more than 6 percent after an influential Wall Street analyst cut his outlook for the company. The reasons for the downgrade could mean slower-than-expected sales for virtually every PC manufacturer in the second half. His bleak forecast could mean trouble not just for Intel but also for rival chipmaker AMD and major PC makers such as Compaq Computer, Dell Computer and Gateway.

Shares of Micron Technology, the biggest U.S. maker of computer-memory chips, fell almost 11 percent after an analyst said memory prices will be lower than expected this quarter, hurting Micron's profit. Availability of dynamic random-access memory, the main memory chips in PCs, has tightened, and prices have climbed in recent months.

The companies that make the computers that use computer memory chips, such as Sony and Trigem Computer, say sales are strong and getting better, a sign that chip demand won't be slowing anytime soon. "I don't see signs of a slowdown," a Sony spokesman said.

Although a noted analyst said the PC market is slowing, computer executives and other market watchers say that is not the case. Three large PC manufacturers disagreed with those projections, noting that sales had picked up after the seasonally slow second quarter before an expected surge in the fourth quarter. "He's way overreacting," said a representative of one PC maker who asked not to be identified.

Cisco Systems has faced a lingering shortage of some components used in its network routers and switches for most of the summer, which has caused it to delay delivery of the final products to its customers for several weeks. The delays have not affected the company's bottom line and indicate that demand for Cisco's products remains red hot. But customers who are used to receiving products within two weeks said that the situation shows no signs of abating and in some cases is hurting revenues.

Feeling safe and secure
A new virus is propagating in the Philippines, but it is not as dangerous as the "Love" bug that plagued corporate computer systems earlier in the year. A watchdog group received word that a Trojan horse was reported in the wild in the Philippines, meaning it is attacking computer systems after it arrives in an email attachment. Once the attachment is opened, the "DonaldD.trojan" is executed, and--like the Love bug--can collect usernames and passwords from the victim.

With the arrival of the first known Trojan horse for the Palm, antivirus software makers are targeting handheld devices in earnest. Symantec released a beta of an antivirus application that is stored directly on the Palm. Although antivirus software makers tend to see even the slightest bug or threat of a bug as an opportunity to tout the need for their software, the popularity of Palm's products and other handhelds is making these mobile devices a prime target for hackers.

Microsoft is investigating a security vulnerability in its Internet Explorer browser that could give attackers free rein in reading known files on targeted computers. The bug is the latest in a long history of vulnerabilities involving the use of Web scripting languages to circumvent browsers' security restrictions.

Just days after Amazon.com tightened its privacy policy, a bug in one of its Web pages exposed numerous email addresses of the site's Affiliate members. The Web page that helps Affiliate members when they have forgotten their password was the source of the privacy breach. When a person clicked the link to retain a member password, the box designated for email addresses became filled with other members' addresses.

Home furnishings retailer IKEA closed its online catalog order site after a privacy breach made the personal information of tens of thousands of its customers available online. The file contained the names, addresses, phone numbers and email addresses of customers who ordered IKEA catalogs. An error code gave users the name of the database file, which when added to the URL gave access to the entire database

American Express announced a new suite of online security and privacy products, the first of which is a "disposable" credit card number for its members. Cardholders using the disposable credit card option will be able to log on to a secure Web site and receive a one-time-use credit card number to make purchases over the Internet. The company also announced a program that will allow customers to "set the meter" on how much information is collected about them while browsing the Web or allow them to surf incognito.

Labor Day week layoffs
Qwest Communications International said it will lay off 11,000 employees during the next 16 months and announced that its revenue is likely to be higher than expected as a result of its unprecedented merger with US West. Specifically, Qwest plans to eliminate 4,500 jobs by the end of the year, higher than previous reports that had indicated Qwest would likely trim between 2,000 and 4,000 jobs.

Santa Cruz Operation will lay off 190 people and take a $5 million to $6 million charge this quarter as part of its sale of Unix operating system software and services to Linux company Caldera Systems. The layoffs, 19 percent of the company's work force, will occur in the parts of the business being transferred to Caldera.

Entertainment Web site Shockwave.com is shedding staff and cutting costs as new management seeks to tighten the company's focus on interactive games and films. Shockwave, which offers online games and short animated films, has laid off 20 of its 170 employees.

Software maker Novell confirmed widespread speculation that it would cut its work force in an effort to return to profitability, announcing a staff reduction of about 16 percent. The company said it will slash about 900 employee positions, bringing its worldwide work force to approximately 4,600, and will take a fourth-quarter restructuring charge of up to $50 million.

Struggling software maker Corel said it will lay off 139 employees in its Dublin, Ireland, engineering facility as part of a restructuring plan aimed at cutting annual expenses by $40 million. The move will affect positions in departments such as Web services, technology, technical services, finance, localization, manufacturing, human resources and management information systems.

Webvan said it has laid off 50 workers as part of its acquisition of HomeGrocer.com. The layoffs, which affected one out of every six workers at HomeGrocer's main office in Kirkland, Wash., were mostly in white-collar jobs that overlapped with similar positions at Webvan's Foster City, Calif., headquarters.

Also of note
Microsoft is retooling its interactive TV strategy yet again, incorporating its TV software into its next-generation desktop operating system, in a move some say indicates a retreat from the cable set-top box business...After a two-year pause and uninspiring sales, the software giant is also reviving its Windows CE sub-notebook line, which will relaunch as the Handheld PC 2000...The National Football League is partnering with online youth network Snowball.com to kick off a Web site based on the NFL's teen-driven TV show, "Under the Helmet"...Verizon Communications cut certain prices for high-speed Internet access, making its pricing more uniform nationwide.